Market analyst: Will support hold?
The market has done an upside reversal since the U.S. Department of Agriculture's Sept. 10 report and rallied nicely in corn and soybeans despite the report being quite bearish, both nationally and internationally.
However, after rallying for about a week following the bearish report, the market is now faltering.
In typical fashion, the market seems to have trapped anyone who sold a bearish report, and punished them for one week until they most probably liquidated their short positions. That clears the way for the market to drop hard, if we break that support.
Weather forecasts continue to call for above normal temperatures and below normal precipitation for the next two weeks. There was a bit of rain in Missouri and Illinois earlier this week, but only light rain elsewhere in the eastern Corn Belt.
Essentially, this is going to lead to a rather rapid harvest as we enter peak harvest season.
Grains were sold more aggressively about a week after the USDA's Sept. 10 report, as some were skeptical the post-report rally was nothing more than a bear trap. So far, that seems to have been a very wise decision.
Pro Ag has sold three to four crop years in the past 12 months — aided by the wisdom of knowing that after six years of bad prices, selling at the lows was no longer a good alternative. In fact, there was virtually no risk storing $3.10 corn futures and $8 soybean futures levels, and that patience paid off immensely for the two to three years of crops in bins or owned on paper. Twitter had fun with that idea during the pandemic, but we were fine with that when we deposited our profits in the bank in the past year!
Will it be wise now to sell $5 corn, $12.50 soybeans, and $7.90 spring wheat for 2022? We have something to protect here, versus the $3 corn, $8 soybeans and $4 wheat everyone fell over each other to sell during the pandemic and trade war.
Crop conditions released Monday showed 1% improvements in both corn and soybeans, with corn at 59% rated good/excellent and soybeans at 58% good/excellent.
Pro Ag yield models rose 0.76 bushels to 178.4 bushels corn (vs. 176.3 bushels USDA), and dropped 0.05 bushels to 49.3 bushels for soybeans (but we lost the 1988 crop year in ratings).
So it appears that both corn and soybean conditions are rising during harvest, usually a sign that crops are better than expected. With little risk of frost this year as crops are advanced in maturity, the crop will probably continue to improve through normal frost dates. That means prices are bound to move lower as the crop is harvested. Ten percent of the corn is already harvested, and 6% of soybeans are also harvested, so it will advance quickly in the coming weeks.
That will spell trouble for corn and soybean markets, as if we fall below the upside reversal formed on the bearish September report day, both will be susceptible to larger losses.
Note sorghum is also advanced in maturity, with conditions much better than last year (56% rated good/excellent versus 51% last year). Sugar beets are 12% harvested, with a good situation for harvest with more moisture now in the ground making it easier to lift the beets from the soil.
Winter wheat is 21% planted (3% ahead of normal) and 3% emerged (1% ahead). Pasture/range condition is 24% good/excellent, down 1% and just slightly below last year's 27% rating.
Soil moisture is 50% adequate surplus topsoil (-1% this week) but still slightly below last year's 58% rating. Subsoil is 48% rated adequate/surplus, down 1% this week and below last year's 57% rating. The soil moisture problem is still in the Northwest, but it improved immensely from Aug. 20. In fact, the outlook for 2022 crops also improved in the northwest Corn Belt with the fall rains arriving. Dry weather is also depleting soil moisture supplies nationwide now, but no one minds since it is also helping harvest.
In summary, it's been a fun ride higher the past 12-15 months, and the market has made great strides to help us forget $3 corn, $8 soybeans and $4 wheat.
But those market lows are still on charts, and because of that, they're always in reach during almost any 12 month period (just like $7.70 corn was within 12 months reach last May when prices were $3).
Markets fluctuate with the times, and we must remember we are mere humans, not gods.
Ray Grabanski can be reached at email@example.com.